Question

Listed below are the transactions that affected the shareholders' equity of Branch-Rickie Corporation during the period 2021-2023. At December 31, 2020, the corporation's accounts included: Common stock, 111 million shares at $1 par Paid-in capital-excess of par Retained earnings ($ in thousands) $111,000 666,000 900,000 a. November 1, 2021, the board of directors declared a cash dividend of $0.50 per share on its common shares, payable to shareholders of record November 15, to be paid December 1. b. On March 1, 2022, the board of directors declared a property dividend consisting of corporate bonds of Warner Corporation that Branch-Rickie was holding as an investment. The bonds had a fair value of $2.6 million, but were purchased two years previously for $2.3 million. Because they were intended to be held to maturity, the bonds had not been previously written up. The property dividend was payable to shareholders of record March 13, to be distributed April 5. c. On July 12, 2022, the corporation declared and distributed a 6% common stock dividend (when the market value of the common stock was $18 per share). Cash was paid in lieu of fractional shares representing 660,000 equivalent whole shares. d. On November 1, 2022, the board of directors declared a cash dividend of $0.50 per share on its common shares, payable to shareholders of record November 15, to be paid December 1. e. On January 15, 2023, the board of directors declared and distributed a 3-for-2 stock split effected in the form of a 50% stock dividend when the market value of the common stock was $19 per share. f. On November 1, 2023, the board of directors declared a cash dividend of $0.35 per share on its common shares, payable to shareholders of record November 15, to be paid December 1.

Answer 1

No. Date General Journal Debit Credit 1 55,500,000 November 01, 2021 Retained Earnings (111,000,000 0.50) Dividend Payable (to record declaration of dividend) 55,500,000 2 November 15, 2021 No Entry Required 3 55,500,000 December 01, 2021 Dividend payable Cash (to record payment of dividend) 55,500,000 March 01, 2022 300,000 Investment in Warner Bonds (2,600,000 -2,300,000) Gain on appreciation of Investments (to record appreciation of Investments) 300,000 5 March 01, 2022 2,600,000 Retained Earnings Property dividend payable (to record declaration of property dividend) 2,600,000 6 March 13, 2022 No Entry Required 1 7 April 05, 2022 2,600,000 Property dividend payable Investment in Warner Bonds (to record payment of property dividend) 2,600,000 July 12, 2022 119,880,000 Retained earnings (6,600,000 18) Common stock (6,000,000 x 1) Paid in capital in excess of par (6,000,000 x 17) Cash (660,000 x 18) (to record declaration and payment of stock dividend) 6,000,000 102,000,000 11,880,000

9 58,500,000 November 01, 2022 Retained Earnings (117,000,000 0.50) Dividend Payable (to record declaration of dividend) 58,500,000 10 November 15, 2022 No Entry Required 11 58,500,000 December 01, 2022 Dividend payable Cash (to record payment of dividend) 58,500,000 12 January 15, 2023 58,500,000 Retained Earnings (58,500,000 > 1) Common stock (to record declaration and distribution of stock dividend) 58,500,000 61,425,000 November 01, 2023 Retained Earnings (175,500,000 x 0.35) Dividend Payable (to record declaration of dividend) 61,425,000 14 November 15, 2023 No Entry Required 15 61,425,000 December 01, 2023 Dividend payable Cash (to record payment of dividend) 61,425,000

Working Notes: Transaction C) Common stock dividend Number of shares outstanding Stock dividend (111,000,000 x 6%) Cash issued for fractional shares therefore, (6,660,000 - 600,000) shares will be distributed 6% 111,000,000 6,660,000 660,000 6,000,000 Transaction d) Number of shares outstanding before stock dividend Add: Common shares distributed for stock dividend Total Shares outstanding 111,000,000 6,000,000 117,000,000 Transaction e) Stock dividend % 50% As the stock dividend % is more than 25% it is considered as the large stock dividend. And Large stock dividend are recorded as the par value of the stock. Common shares outstanding 117,000,000 Stock dividend (117,000,000 > 50%) 58,500,000 Transaction f) Common stock shares outstanding before transaction e Add: Stock dividend distributed in transaction f Common stock shares outstanding 117,000,000 58,500,000 175,500,000

BRANCH -RICKIE CORPORATION Statement of Shareholders' Equity For the Years Ended Dec.31,2021, 2022 and 2023 Additional Paid in Common stock Capital Jan.1, 2021 111,000,000 666,000,000 Net Income Cash Dividends Dec.31, 2021 111,000,000 666,000,000 Property Dividends Common stock dividend 6,000,000 102,000,000 Net Income Cash Dividends Dec 31, 2022 117,000,000 768,000,000 3-for-2 split effected in the form of a stock dividend 58,500,000 Net Income Cash Dividends Dec.31,2023 175,500,000 768,000,000 Total Shareholders' Retained Earnings Equity 900,000,000 1,677,000,000 385,000,000 385,000,000 (55,500,000) (55,500,000) 1,229,500,000 2,006,500,000 (2,600,000) (2,600,000) (119,880,000) (11,880,000) 450,000,000 450,000,000 (58,500,000) (58,500,000) 1,498,520,000 2,383,520,000 (58,500,000) 510,000,000 510,000,000 (61,425,000) (61,425,000) 1,888,595,000 2,832,095,000 Note: All Amounts are in actual figures. 2) Large stock dividends can also be adjusted from the additional paid in capital instead of Retained Earnings